To Manage Employer Prescription Costs, Get the Right Drug for the Right Condition

“From a more clinical perspective, the key to managing drug costs is making sure that the right people are using the right drug for the right medical condition,” she said.

Obstacle #1: Not Adhering to the Formulary

“What is a formulary?” asked Michael Cornwell, Director of Sales and Underwriting. “A formulary is a guide that the Pharmacy Benefit Manager puts out that says these brand drugs are the preferred versus the non-preferred versus generics.

“For example, the average cost of a generic today is about $28-$29. The average cost of a brand drug is probably in the $167 range.

“Members do not always know what drugs are on the formulary,” said Ms. Sarrimanolis. “Certainly their providers don’t always know what drugs are on the formulary, so that’s where some of the confusion and disruption comes from.

“We try to fill a lot of these gaps through member education. Pharmacy Benefit Managers do a great job of outreaching to members through the mail, emails and on their websites. Unfortunately, members might not always understand that information.

“What we need to do is to encourage members to become smarter consumers and to make the best, most cost-effective choice for their own medication.”

The Pharmacy Benefit Manager’s Role

“A Pharmacy Benefit Manager, or PBM, serves multiple purposes,” Mr. Cornwell said. “One purpose is to process all the pharmacy claims. By doing that, benefits administrators like MedCost are able to collect the data and analyze it.

“Zafeira, as our pharmacist on staff, and our Care Management teams know what usage patterns are. We know what kinds of drugs people are taking.

“The PBMs certainly are negotiating discounts at the drugstore and contract rates for us to get the best prices that we can for the drugs that we take. PBMs can also provide data on clinical reasons to manage those drugs and make sure that they’re the most appropriate and cost-effective.

Obstacle #2: Not Educating Members

“One of the largest reasons that people are readmitted to the hospital is because they don’t adhere to directions to take their medication.

“Programs like step therapies ask: ‘Have you tried this drug before you try that one?’

“Prior authorizations ask: ‘Why do you need this drug?’ For example, you must have the proper genotype to be able to take certain treatments for Hepatitis C.

“Prior authorizations cause a lot of disruption to the member. You go to the doctor for a prescription. You go to the drugstore and they say why do you need to take this drug? And you go back to your physician but they’re busy. It takes time, so it’s all disruptive at a time when you want your medication. It’s hard to understand.

“Member education is extremely important. It would be nice if we could fill that gap to where physicians knew exactly what your formulary was at the point that physicians are prescribing that medication. Right now that doesn’t exist.

“In drug costs, it becomes pretty significant. As Zafeira said, as the drug manufacturers continue to make more drugs (which is a good thing), it puts more challenges on us to make sure that the drugs are appropriate and cost-effective.

Using PBM Websites to Shop Employer Prescription Costs

“We’re going to go through more disruption as a result of that. We’re going to have to get used to it. But there are a lot of new tools coming on the marketplace to try to help people shop for drugs,” Mr. Cornwell observed.

“The PBMs have websites where you can log in under your personal account with your PBM that is administering your drugs. You can put in the name of the drug and the details; and it will show you the best places the most price-competitive places, to buy that drug. It will also match up what your formulary is and if there are alternatives that are cheaper than the drug you have.

Specialty Drug Costs Can Be Managed with These Strategies

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“It’s interesting that a lot of these specialty drugs are designed for a very small percentage of the population that have a certain disease state,” said Michael Cornwell, MedCost Director of Sales and Underwriting.

“There may be less than 200,000-300,000 people in the country that need that particular drug. That’s one of the reasons specialty drugs are so expensive.”

MedCost Pharmacist Zafeira Sarrimanolis agrees. “It’s an exciting time in the drug manufacturing world, because all of these new medications have been coming out over the past ten years or so for medical conditions that really weren’t treatable before.

“For example, hepatitis C medications previously were not very effective and really hard for patients to tolerate. Now we have new medications on the market that are practically a 100% cure rate for patients.

“These drugs are also a lot easier for them to take and tolerate. Part of the problem with that is the price tag on some of those new medications.”

“One of the largest reasons people are readmitted to the hospital is because they don’t adhere to the medication,” said Michael Cornwell. “Programs likestep therapy ask you to try a clinically appropriate drug before you try a similar but more expensive one.

“Prior authorizations probe a physician’s reasoning behind prescription choices. A lot of these specialty drugs are really for a pretty small percentage of the population. So when you look at a population as a whole, the people taking those drugs are usually between 1%-1½% of your population. That’s the good news.

“The bad news is they’re very expensive. Probably the biggest growth area in the specialty arenas are the cancer drugs. There’s a whole pipeline of new cancer treatments hitting the marketplace. But in that pipeline, member education and aid in helping and consulting is a good thing too. It allows us to have some personal outreach try to help these people manage their disease state.

By Zafeira Sarrimanolis, PharmD, MedCost Clinical Consultant

Prescription insurance has become an increasingly major cost for employers. New drug approvals by the US Food and Drug Administration (FDA) are expected to escalate this year with multiple innovative drugs already being approved for cancer, multiple sclerosis and other conditions.

As researchers discover more treatments, costs will continue to climb. For this reason, smart management of pharmacy plans will be even more vital for employer health plans.

2017 Drug Pipeline

2016 saw a below average number of drug approvals. 2017 is expected to bounce back with 30+ new specialty drugs.

Specialty medications are high-cost prescription drugs used to treat complex conditions. The blue bar (below) shows specialty medication drug approvals. The green bar represents traditional brand and generic drugs. Technology, innovation and new scientific discoveries have caused specialty medication drug approvals to rapidly increase over the last few years.

Growth of Novel Drugs in Prescription Insurance

In 2016, 22 novel drugs were approved, which was the lowest number since 2010. A novel drug is an innovative product with a unique chemical structure that has never been approved by the FDA before. Typically novel drugs meet an unmet medical need.

As of May 5th, 20 novel drugs have already been approved this year. It’s an exciting time for healthcare as we treat more complex conditions and improve member health and quality of life.

But it comes at a cost – literally.

Summary

When1% of prescriptions drive 40-45% of an employer’s pharmacy spend, avoiding wise management is no longer optional. Part of my role as a MedCost Pharmacist is to emphasize the importance of cost-management strategies to our employers and consultants.

I also work closely with our clients to help employers understand the importance of educating their employees about these changes and why they are needed.

It’s all about making sure each employee gets the right drug for the right medical condition at the right time. That’s how we control pharmacy costs.

“There are a combination of factors,” said Zafeira Sarrimanolis, PharmD, MedCost Pharmacist and Clinical Consultant. “This is a major problem for employers who do not want to make employees unhappy by instituting clinical pharmacy programs in their health plans.”

What Are the Factors in Employer Prescription Drug Costs?

Manufacturer Price Hikes.

Costs for drugs like EpiPen® and Humira® have been widely publicized.[i] Prices are escalating 16-17% per year. Manufacturers are also promoting new uses for existing high-cost drugs, even though there are already FDA-approved, lower-priced drugs for the same conditions already on the market.

Increased Use of Prescription Drugs.

The number of people taking cholesterol drugs is up from 6.5% (1999-2002) to 13.1% (2009-2012). Similar increases are seen in other common chronic conditions, including depression which increased 6.4% to 9.0% over the same period.[ii]

3.Specialty Drugs.

New, expensive medications for diseases such as cancer and multiple sclerosis are constantly hitting the market. Specialty drugs account for about 1% of total prescriptions but 35-45% of pharmacy spend, averaging $3,400 per drug per month.[iii]

4. Patent Expirations.

In 2016, Crestor, Zetia and Benicar all had patent expirations. The increased competition from generic equivalent drugs is decreasing costs across the board. Unfortunately for high-cost injectable medications like Humira, the introduction of generic versions is not as simple.

5. Advertising.

An estimated 80 drug commercials per hour are shown across TV outlets.[iv] Radio, magazines, newspapers and social media also contain prescription drug ads that prompt individuals to ask doctors about specific drugs.

“It’s an exciting time in the drug industry with the influx of new drugs coming on the market,” said Michael Cornwell, MedCost Director of Sales and Underwriting. “But it also presents challenges for us in the industry since controlling these costs is not always user-friendly.”

EmployerStrategies for Controlling Prescription Drug Costs

Pharmacy Benefit Managers

Working with a Pharmacy Benefit Manager (PBM) supports cost management for employers in the pharmacy portion of their health plans. A PBM negotiates discounts and rebates from drug manufacturers, which are then returned back to the employer. PBMs also contract with pharmacies and process pharmacy claims.

The PBM controls pharmacy costs for employers through development of a preferred drug list (or formulary) and clinical programs. MedCost as a benefits administrator works closely with PBM partners to get the best rates for employers, customizing a pharmacy plan for each client’s unique population.

Formulary Management

Preferred drug lists are arranged in tiers, or cost levels, of generic, preferred and non-preferred medications. A PBM Pharmacy & Therapeutics Committee of industry experts follows a clinically-driven formulary decision-making process to define the preferred drug list. Some drugs are excluded from coverage in favor of clinically-similar alternatives that treat the same disease.

Exclusions can save as much as 15% of prescription drug costs in an employer’s health plan.

Prior Authorization

Prior authorizations require a doctor to provide additional clinical information to determine whether the health plan covers that drug. Employees, providers and health plan administrators dislike the inconvenience of waiting for approval of drugs. But this strategy is key to ensure that members take safe, clinically-appropriate and cost-effective drugs.

“There’s a human factor,” said Michael Cornwell. “We do not want to be disrupted in using familiar medicines. But employers cannot save money without these strategies.”

Step Therapy

Step therapy requires initial use of a lower-cost, clinically-similar drug for a medical condition, before a higher-cost drug for the same condition is covered by a health plan.

Summary

“When1% of prescriptions drive 40-45% of an employer’s pharmacy spend, avoiding wise management is no longer optional”, said Zafeira Sarrimanolis. “Part of my role as a MedCost Pharmacist is to emphasize the importance of cost-management strategies to our employers and consultants.”

“I also work closely with our clients to help employers understand the importance of educating their employees about these changes and why they are needed.”

“It’s all about making sure each employee gets the right drug for the right medical condition at the right time. That’s how we control pharmacy costs.”

By Zafeira Sarrimanolis, PharmD, MedCost Clinical Consultant

Pharmacy terms in health plans can be confusing. Employers must understand their pharmacy plans, especially in this era of rising drug costs.

As a pharmacist, I help MedCost clients navigate their Pharmacy Benefit Manager and identify opportunities for cost-saving in their company health plans. Here are some terms employers need to know when determining prescription drug benefits for their health plan.

1. Pharmacy Benefit Manager (PBM)

An organization that develops and maintains preferred drug lists, contracts with pharmacies, and negotiates discounts and rebates with drug manufacturers. PBMs also process and pay prescription drug claims in addition to implementing strategies that save pharmacy plan dollars, while improving member health.

2. Formulary

A prescription drug list that is preferred by a health insurance plan. Identifies medications available to treat certain medical conditions and organizes into tiers.

3. Tiers

Different cost levels a member pays for a medication. A tier 1 medication is generally generic and lower-cost, while higher-cost brand name medications fall in Tier 2 or 3.

4. Brand-name drug

Developed, patented and sold exclusively by a pharmaceutical manufacturer.

5.Generic drug

Manufactured and sold after the brand-name patent has expired. For example, Tylenol® is a brand-name medication and acetaminophen is its generic equivalent. Generics promote competition and drive down drug costs. Almost 80% of prescription drugs sold in the US are generics.

6. Specialty drug

A high-cost, prescription drug that treats complex conditions such as rheumatoid arthritis, cancer or multiple sclerosis. These drugs typically have special storage requirements, administration techniques and require specific monitoring. Specialty drugs may account for up to 45% of a plan’stotal drug costs.

9. Prior authorization

Requires a doctor to provide additional clinical information to determine coverage of the prescription drug under the plan.

10. Step therapy

Trying a lower-cost, clinically-similar drug before a higher-cost drug for the same medical condition is allowed under the plan.

Summary

Step therapies and prior authorizations feel disruptive to employees. For that reason, employers are faced with the challenge of balancing employee satisfaction with cost containment.

Our clients are seeing significant results using preferred formularies and these cost-saving strategies. One group avoided expenses of over $250,000 in the first months after adopting a managed approach with one of our PBM vendors.

The goal is to ensure the right people get the right drug for the right medical condition at the right time. With our PBM partners, we work to ensure that our members are utilizing safe, clinically-appropriate, cost-effective treatments. Employers can partner with their employees to become better healthcare consumers so everyone benefits in the use of prescription drugs.